Einde inhoudsopgave
Exit remedies for minority shareholders in close companies (IVOR nr. 82) 2011/4.4.2.2
4.4.2.2 Statutory constraints on company controllers
dr. Q. Wang, datum 02-05-2011
- Datum
02-05-2011
- Auteur
dr. Q. Wang
- JCDI
JCDI:ADS403006:1
- Vakgebied(en)
Ondernemingsrecht (V)
Voetnoten
Voetnoten
Formerly s. 168(6) of the Companies Act 1929, now s. 122 (1) (g) of the Insolvency Act 1986.
'In many cases, ... the winding up of the company will not benefit the minority shareholders, since the break up value of the assets may be small, or the only available purchaser may be that very majority whose oppression bas driven the minority to seek redress.' Report of the Committee on Company Law Amendment (1945) Cmd 6659, para. 60.
Report of the Committee on Company Law Amendment (1945) Cmd 6659; Report of the Company Law Committee 1962, Cmd 1749.
Section 210 of the Companies Act 1948. (1) Any member of a company who complains that the affairs of the company are being conducted in a manner oppressive to some part of the members (including himself) may make an application to the court by petition for an order under this section. (2) If on any such petition the court is of opinion— (a) that the company's affairs are being conducted as aforesaid; and (b) that to wind up the company would unfairly prejudice that part of the members, but otherwise the facts would justify the making of a winding up order on the ground that it was just and equitable that the company should be wound up; the court may, with a view to bringing to an end the matters complained of, make such order as it thinks fit, whether for regulating the conduct of the company's affairs in future, or for the purchase of the shares of any members of the company by other members of the company or by the company and, in the case of a purchase by the company, for the reduction accordingly of the company's capital, or otherwise.
Scottish cooperative society lit. v. Meyer, [1959] AC 324.
Paul Davies, 'Introduction to Company Law', Clarendon Law Series, Oxford University Press, 2002, p. 237.
David Sugarman, Reconceptualising Company Law: reflections on the Law Commission's Consultation Paper on Shareholder Remedies: Part II, No. 9 Vol. 18, 1997, the Company Lawyer, p. 238. The two cases are: Scottish cooperative society lit. v. Meyer, [1959] AC 324, and Re HR Harmer Ltd [1959] 1 WLR 62.
Section 75 of the Companies Act 1980. (1) Any member of a company may apply to the court by petition for an order under this section on the ground that the affairs of the company are being or have been conducted in a manner which is unfairly prejudicial to the interests of some part of the members (including at least himself) or that any actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial.
See Report of the Committee on Company Law Amendments HMSO 1962; cmnd 1749 at s. 212 (c): it should be made clear that s. 210 extends to cases where the affairs of the company are being conducted in a manner unfairly prejudicial to the interests of some part of the members and not merely in an 'oppressive' manner.
Ibid. cmnd 1749, s. 203.
Section 459 of the Companies Act 1985 (pre amendment by the Companies Act 1989) (1) A member of a company may apply to the court by petition for an order under this Part on the ground that the company's affairs are being or have been conducted in a manner which is unfairly prejudicial to the interests of some part of the members (including at least himself) or that any actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial. Since the amendment, the remedy hes included not only conduct affecting some part of the members, but allo conduct affecting all members in the company, whereby matters which are wrongs to the company, as well as matters affecting all shareholders, such as the failure to pay dividends can be litigated under s. 459.
Ebrahimi v. Westbourne Galleries Ltd [1972] 2 All ER 492, [1973] AC 360.
Previously, there was a statutory remedy (now s. 122 of IA 1986) in the Insolvency Act for minority shareholders when there was oppression from the majority. The minority was empowered to go to the court and to request the winding-up of the company.1 Because of the severity of a winding up, however, the construction of oppression was narrow in scope, which led to a restricted availability of this remedy and, undoubtedly, inadequate protection for the minorities.2 Consequently, there was room for providing a platform for minority protection which was free from the restrictions of derivative actions and the harshness of a winding-up order.
The Cohen Committee in 1945 and the Jenkins Committee in 1962 worked in turn on this aspect to strengthen the protection of minority shareholders. 3 By virtue of the Cohen Committee's work, section 210 was introduced in the CA 1948,4 whereby any member of the company who complained that the affairs of the company were being conducted in a manner oppressive to some part of the members (including himself) may make an application to the court. Litigants and judges paid attention to what was meant by `oppressive'. In the end, a cautious and restrictive definition was employed, which required proof of occurrence of "burdensome, harsh and wrongful conduct".5 Consequently, the impact of s. 210 was not as great as the legislators had probably expected.6 Statistics show that there were only 2 reported successful cases based on s. 210 during its existence.7 So the significance of s. 210 lies rather in the fact that it severed the link to the winding-up remedy by providing alternative forms of relief for oppressive conduct than in a real improvement in the protection of minority shareholders.
Later, the Jenkins Committee made some changes to s. 210, which became s. 75 of the CA 1980.8 It changed the word "oppressive" to "unfairly prejudicial" as the standard for court review and relief. By using the new term, the Jenkins committee hoped to avoid the narrow interpretation of oppression.9 And unfairly prejudicial conduct was no longer limited to "actual illegality or invasion of legal rights."10
S. 75 was replaced by s. 459 in CA 1985 and amended in 1989.11 S. 459 was a traditional equitable remedy whereby courts had heard a large amount of cases and had reached a certain level sophistication in the area of minority shareholder protection. The current s. 994 in the CA 2006 repeats the wording of s. 459, and the analysis of this part therefore heavily relies on cases judged on the basis of s. 459. Before we begin to study s. 994, we will have a look at its relationship to s. 122 of IA 1986, which is not the predecessor of s. 994, but which laid the foundation for the understanding of s. 994, especially with the well-known Ebrahimi case.12